Warren, there's a preference in iTunes that allows for automatic updates when your iPod is connected. With that turned on it'll add and erase songs from your iPod when you plug it in according to the changes you've made to your iTunes library. I think you can also do it manually once your iPod is connected, although I've never tried it myself. I know older versions of iTunes allowed you to do this, but I don't know iTunes 7 will.
Are you on a Mac or PC?
Are you on a Mac or PC?